Good first quarter lifts Ten earnings forecasts

Analysts have begun lifting earnings estimates for Ten Network after the group's better-than-expected first quarter results.

Some analysts lifted their full year earnings per share forecasts for 2003-04 after Ten said its first quarter earnings before interest, tax, depreciation and amortisation (EBITDA) had jumped 37 per cent to $105 million.

Goldman Sachs JBWere media analyst Lou Capparelli said Ten's result was largely driven by "a better outcome on costs growth than we have been prepared to factor in".

Ten was benefiting from a cost base which was estimated to be about $10 million lower, partly aided by how Australian TV networks normalise costs for non-recurring items.

"Based on the Q1 result, we are upgrading our EPS forecasts by 3 to 4 per cent in F04-06," Mr Capparelli wrote in a note to clients. "This is driven by lower than forecast costs growth (from 6 per cent ex selling costs in F04 to 4 per cent)."

Ten shares rose another 4c, or 1.4 per cent, to finish around record high levels at $2.88.

Mr Capparelli lifted EPS forecasts for Publishing and Broadcasting, which owns the Nine network, by 2 per cent on expectations of lower cost growth.

Credit Suisse First Boston also lifted its EBITDA forecasts for Ten for 2003-04 by 2 per cent to $245 million, compared to the $214 million Ten reaped in 2002-03.

Media analyst Andrew Greenup flagged that Ten, whose major shareholder is Canada's CanWest, might hand back some of its capital to shareholders.

"With expansion opportunities looking fairly limited to us (CanWest's NZ assets or a third-tier magazine operator in Australia) under the . . . cross-media ownership restrictions, this company should continue to offer a high dividend yield (payout ratio is close to 100 per cent) as well as the potential, in our view, for a modest capital return further down the track given its under-geared balance sheet," he wrote.